Global stocks near new lows in 2022 amid inflation fears

LONDON (Reuters) – Global stocks plunged towards 2022 lows and the Japanese yen fell to levels not seen in nearly a quarter of a century on Monday as sweltering inflation in the United States fueled fears of tougher policy tightening in a large region. Central Bank Week.

The significantly higher-than-expected US CPI reading on Friday was hard to digest as investors sold off bonds and stocks and negated expectations that policy makers were beginning to control higher prices. Read more

With inflation showing no signs of abating, and new mass COVID-19 testing in China raising fears of more crippling shutdowns and shrinking global supply chains, investors are reducing their exposure to risky assets.

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Global stock index (.MIWO00000PUS) is down 0.7%, just shy of a new low in 2022. European stock indexes were a sea of ​​red in early trading, with benchmark stocks down nearly 2% (.STOXX) while decades US stock futures are off to a low start.

β€œThis is happening despite actions central banks have taken thus far that raise fears that they will have to work harder and faster if inflation is to be tamed, the cost of which is increasingly being seen as lower growth,” said Stuart Cole, chief macro strategist at Equiti Capital in London, ‘Maybe Recession’.

Bond markets faced the brunt of the selling as short-term US bond yields rose to their highest levels since late 2007 while the yield curve as measured by the gap between 10- and 2-year US bond yields swung above zero, a level traditionally seen as harbinger of stagnation.

European bonds were also engaged in an extended debt market sell-off after a hawkish European Central Bank meeting last week, with German two-year bond yields rising above 1% for the first time in more than a decade.

Money markets are pricing in roughly 250 basis points in rate hikes by the US Federal Reserve through the end of the year with only five meetings remaining with some investment banks deciding to raise 75 basis points at this week’s policy meeting. Read more

Expectations of further interest rate hikes from global central banks have prompted investors to ramp up their bearish bets on global growth. This is an important week for central banks as the Federal Reserve, Bank of England and Swiss National Bank hold policy meetings.

Multiple growth indicators in the markets on Monday slipped from Hong Kong technology shares to the Australian dollar as investors fled to the perceived safe haven of the US dollar.

The dollar climbed to 135.22 yen, the highest level since October 1998, boosted by rising Treasury yields that continued to trade in Tokyo while the British pound fell more than half a percent after data showed the British economy unexpectedly contracted in April.

china locks

The focus in Asia has been on the dangers of new COVID-19 lockdowns with Beijing’s most populous Chaoyang district announcing three rounds of mass testing to quell a “vicious” COVID-19 outbreak that has emerged in the pub. Read more

Chinese blue-chip stocks (.CSI300) slumped 1.42% and Hong Kong’s Hang Seng Index (.HSI) shed 3.29%. Japan’s Nikkei (.N225) fell 3.03%, and South Korea’s Kospi (.KS11) fell 3.27%.

“Anyone trying to pick a bottom in China’s growth and equity markets on the grounds that China has been ‘one and done’ in the shutdowns is naive,” said Jeffrey Haley, chief market analyst at OANDA.

Growth stocks slid in China, as shares of Hong Kong-listed technology giants (.HSTECH) slumped 4.45%. Heavyweights Alibaba (9988.HK), Tencent (0700.HK) and Meituan (3690.HK) were down 4% to 6%.

Leading bitcoin has fallen more than 6% to its lowest level since December 2020 at $2,488,888.

Meanwhile, crude oil prices eased, with Brent crude futures down 2% to $119.20 a barrel, as growth concerns dominated sentiment.

Consumer price index and wage growth
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(Sikat Chatterjee report). Editing by Emilia Sithole Mataris

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